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LOANS
 12 Months Ended
Dec. 31, 2011
LoansAbstract  
LOANS

3. LOANS
   
  Major classifications of loans are as follows:

 

    DECEMBER 31,  
    2011     2010  
             
Commercial loans   $ 55,565,525     $ 50,618,945  
Commercial Real Estate:                
Commercial real estate construction     3,564,327       2,701,550  
Commercial real estate other     106,408,621       105,303,361  
Consumer:                
Consumer real estate     43,185,861       43,806,004  
Consumer other     4,984,778       5,595,804  
      213,709,112       208,025,664  
Allowance for loan losses     (3,106,884 )     (2,938,588 )
                 
Loans, net   $ 210,602,228     $ 205,087,076  

 

  Changes in the Allowance for Loan Losses are summarized as follows:

 

    YEARS ENDED DECEMBER 31,  
    2011     2010     2009  
                   
Balance at beginning of year   $ 2,938,588     $ 3,026,997     $ 1,429,835  
Provision for loan losses     480,000       670,000       2,369,000  
Charge offs     (383,714 )     (778,820 )     (777,166 )
Recoveries     72,010       20,411       5,328  
Balance at end of year   $ 3,106,884     $ 2,938,588     $ 3,026,997  

 

  The Bank had impaired loans totaling $7,417,892 as of December 31, 2011 compared to $3,559,528, and $2,502,202, as of December 31, 2010, and 2009, respectively. The impaired loans include non-accrual loans with balances at December 31, 2011, 2010, and 2009 of $923,671, $945,328, and $627,373, respectively. The Bank had two restructured (“TDR”) loans at December 31, 2011, one restructured loan at December 31, 2010, no restructured loans for the year ended December 31, 2009. According to GAAP, the Company is required to account for certain loan modifications or restructuring as a troubled debt restructuring (“TDR”). In general, the modification or restructuring of a debt is considered a TDR if the Company, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that the Company would not otherwise consider. At December 31, 2001 and 2010 troubled debt restructurings had an aggregate balance of $491,153 and $153,015, respectively.
   
  There was one loan at December 31, 2011, that was over 90 days past due and still accruing interest. There were no loans over 90 days past due and still accruing interest at December 31, 2010.
   
  The accrual of interest is generally discontinued on loans, which become 90 days past due as to principal or interest. The accrual of interest on some loans, however, may continue even though they are 90 days past due if the loans are well secured, in the process of collection, and Management deems it appropriate. Non-accrual loans are reviewed individually by Management to determine if they should be returned to accrual status.

 

Loans Receivable on Non-Accrual  
December 31, 2011  
Commercial   $ 4,018  
Commercial Real Estate:        
Commercial Real Estate - Construction     -  
Commercial Real Estate - Other     851,672  
Consumer:        
Consumer - Real Estate     67,981  
Consumer - Other     -  
         
Total   $ 923,671  

 

Loans Receivable on Non-Accrual  
December 31, 2010  
Commercial   $ 6,702  
Commercial Real Estate:        
Commercial Real Estate - Construction     -  
Commercial Real Estate - Other     938,626  
Consumer:     -  
Consumer - Real Estate     -  
Consumer - Other     -  
         
Total   $ 945,328  

 

The following is a schedule of the Bank’s delinquent loans, excluding mortgage loans held for sale and deferred loan fees, as of December 31, 2011 and December 31, 2010.

 

December 31, 2011  
    30-59
Days Past
Due		     60-89
Days
Past Due		     Greater
Than
90 Days		     Total
Past Due		     Current     Total
Loans
Receivable		     Recorded
Investment
> 90 Days and
Accruing		  
Commercial   $ 50,892       -       -       50,892       55,514,633       55,565,525       -  
Commercial Real Estate:                                                        
Commercial Real Estate -Construction     -       -       -       -       3,564,327       3,564,327       -  
Commercial Real Estate -Other     1,268,321               788,167       2,056,488       104,352,133       106,408,621       282,173  
Consumer:                                                        
Consumer Real Estate     -       -       -       -       43,185,861       43,185,861          
Consumer-Other     4,401       30,319       605       35,325       4,949,453       4,984,778       -  
Total   $ 1,323,614       30,319       788,772       2,142,705       211,566,407       213,709,112       282,173  

 

December 31, 2010  
    30-59
Days Past
Due		     60-89
Days
Past Due		     Greater
Than
90 Days		     Total
Past Due		     Current     Total
Loans
Receivable		     Recorded
Investment
> 90 Days and
Accruing		  
Commercial   $ 7,056       8,038       -       15,094       50,603,851       50,618,945       -  
Commercial Real Estate:                                                        
Commercial Real Estate -Construction     -       -       -       -       2,701,550       2,701,550       -  
Commercial Real Estate -Other     134,072               589,225       723,297       104,580,064       105,303,361       -  
Consumer:                                                        
Consumer Real Estate     -       -       -       -       43,806,004       43,806,004       -  
Consumer-Other     309,684       5,864               315,548       5,280,256       5,595,804       -  
Total   $ 450,812       13,902       589,225       1,053,939       206,971,725       208,025,664       -  

 

  The Company grants short to intermediate term commercial and consumer loans to customers throughout its primary market area of Charleston, Berkeley and Dorchester counties, South Carolina. The Company’s primary market area is heavily dependent on tourism and medical services. Although the Company has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent upon the stability of the economic environment in their primary market including the government, tourism and medical industries. The majority of the loan portfolio is located in the Bank’s immediate market area with a concentration in Real Estate Related (37.70%), Offices and Clinics of Medical Doctors (7.15%), Real Estate Agents and Managers (3.29%), and Legal services (2.92%). Management is satisfied with these levels of concentrations.
   
  As of December 31, 2011 and 2010, loans individually evaluated and considered impaired are presented in the following table:

 

Impaired and Restructured Loans

For the Year Ended December 31, 2011

  
With no related allowance recorded:   Unpaid
Principal
Balance		     Recorded
Investment		     Related
Allowance		     Average
Recorded
Investment		     Interest
Income
Recognized		  
Commercial   $ 83,350     $ 4,018     $ -     $ 8,625     $ 315  
Commercial Real Estate     4,289,820       4,321,755       -       4,299,045       99,046  
Consumer Real Estate Construction     319,536       315,926       -       317,776       12,596  
Consumer Other     -       -       -       -       -  
                                         
Total   $ 4,692,706     $ 4,641,699     $ -     $ 4,625,446     $ 111,957  
                                         
With an allowance recorded:                                        
Commercial   $ 1,360,535     $ 1,281,462     $ 1,281,462     $ 1,298,891     $ 57,458  
Commercial Real Estate     668,950       625,648       187,713       634,511       9,957  
Consumer Real Estate     822,750       819,341       345,494       819,423       34,636  
Consumer Other     50,000       49,742       49,742       49,742       0  
                                         
Total   $ 2,902,235     $ 2,776,193     $ 1,864,411     $ 2,802,567     $ 102,051  

 

Impaired and Restructured Loans

For the Year Ended December 31, 2010

  
With no related allowance recorded:   Unpaid
Principal
Balance		     Recorded
Investment		     Related
Allowance		    

Average
Recorded

Investment

     Interest
Income
Recognized		  
Commercial   $ 83,350     $ 6,702     $ -     $ 12,230     $ 439  
Commercial  Real Estate     2,317,543       2,020,682       -       833,939       66,537  
Consumer  Real Estate  Construction     230,250       230,022       -       836,169       9,499  
Consumer-Other     -       -       -       -       -  
Total   $ 2,631,143     $ 2,257,406     $ -     $ 1,682,338     $ 76,475  
                                         
With an allowance recorded:                                        
Commercial   $ 1,211,163     $ 1,207,163     $ 1,207,163     $ 807,846     $ 37,036  
Commercial  Real Estate Construction     126,000       94,959       86,084       87,431       5,277  
Consumer  Real Estate     -       -       -       -       -  
Consumer Other     -       -       -       -       -  
Total   $ 1,337,163     $ 1,302,122     $ 1,293,247     $ 895,277     $ 42,313  

 

  The following table illustrates credit risks by category and internally assigned grades.

 

December 31, 2011  
    Commercial    

Commercial

Real Estate

Construction

    

Commercial

Real Estate

Other

     Consumer-
Real Estate		    

Consumer -

Other

  
                               
Pass   $ 48,160,256     $ 3,088,190     $ 93,889,871     $ 38,551,256     $ 4,390,391  
Watch     4,000,123       476,137       4,581,885       3,312,679       214,617  
OAEM     2,071,137       -       1,905,745       212,545       311,905  
Sub-Standard     1,334,009       -       6,031,120       1,109,381       67,865  
Doubtful     -       -       -       -       -  
Loss     -       -       -       -       -  
                                         
Total   $ 55,565,525     $ 3,564,327     $ 106,408,621     $ 43,185,861     $ 4,984,778  

 

December 31, 2010  
    Commercial    

Commercial

Real Estate

Construction

    

Commercial

Real Estate

Other

     Consumer -
Real Estate		    

Consumer -

Other

  
                               
Pass   $ 44,264,102     $ 2,226,324     $ 97,949,596     $ 42,017,198     $ 4,915,583  
Watch     3,070,186       475,225       3,516,001       338,614       363,798  
OAEM     1,934,919       -       116,277       379,092       234,007  
Sub-Standard     1,349,738       -       3,721,487       1,071,100       79,985  
Doubtful     -       -       -       -       2,432  
Loss     -       -       -       -       -  
                                         
Total   $ 50,618,945     $ 2,701,549     $ 105,303,361     $ 43,806,004     $ 5,595,805  

 

  The following table sets forth the changes in the allowance and an allocation of the allowance by loan category. The allocation of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in Management’s judgment, should be charged-off. The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-impaired loans and is based on historical loss experience adjusted for current economic factors described above.

 

DECEMBER 31, 2011  
    Commercial    

Commercial

Real Estate

    

Consumer

Real

Estate

    

Consumer-

Other

     Unallocated     Total  
Allowance for Loan Losses                                    
Beginning Balance   $ 1,502,298     $ 128,334     $ 27,200     $ 218,897     $ 1,061,859     $ 2,938,588  
Charge-offs     (17,943 )     (303,403 )     (62,368 )     -       -       (383,714 )
Recoveries     42,662       28,838       510       -       -       72,010  
Provisions     59,493       566,598       126,060       231,441       (503,592 )     480,000  
Ending Balance     1,586,510       420,367       91,402       450,338       558,267       3,106,884  
Ending Balances:                                                
Individually evaluated for impairment     1,285,480       4,947,403       49,742       1,135,267       -       7,417,892  
Collectively evaluated for impairment   $ 54,280,045     $ 105,025,545     $ 4,935,036     $ 42,050,594     $ -     $ 206,291,220  

 

DECEMBER 31, 2010  
    Commercial    

Commercial

Real Estate

    

Consumer

Real Estate

     Consumer Other     Unallocated     Total  
Allowance for Loan Losses                                    
Beginning Balance   $ 1,456,332     $ 42,448     $ 15,651     $ 197,428     $ 1,315,138     $ 3,026,997  
Charge-offs     (417,078 )     (21,356 )     (55,257 )     (285,129 )     -       (778,820 )
Recoveries     14,427       5,484       500       -       -       20,411  
Provisions     448,617       101,758       66,306       306,598       (253,279 )     670,000  
Ending Balance     1,502,298       128,334       27,200       218,897       1,061,859       2,938,588  
Ending Balances:                                                
Individually evaluated for impairment     1,213,865       2,115,641       -       230,022       -       3,559,528  
Collectively evaluated for impairment   $ 49,405,080     $ 105,889,269     $ 5,595,805     $ 43,575,982     $ -     $ 204,466,136  

 

  Restructured loans (loans, still accruing interest, which have been renegotiated at below-market interest rates or for which other concessions have been granted) were $491,153 and $153,015 at December 31, 2011 and December 31, 2010, respectively, and are illustrated in the following table. At December 31, 2011 and December 31, 2010 all restructured loans were performing as agreed. However, the restructured loan of $153,015 at December 31, 2010 failed to continue to perform as agreed and, as a result, the loan was charged off in March 2011.

 

Modification  
As of December 31, 2011  
    Number of
Contracts		     Pre-Modification
Outstanding
Recorded Investment		     Post-Modification
Outstanding
Recorded Investment		  
Troubled Debt Restructurings                  
Commercial                  
Commercial Real Estate     1     $ 375,323     $ 375,323  
Commercial Real Estate Construction     -     $ -     $ -  
Consumer Real Estate-Prime     1     $ 115,830     $ 115,830  
Consumer Real Estate-Subprime     -     $ -     $ -  
Consumer Other     -     $ -     $ -  
                         
Troubled Debt Restructurings That Subsequently Defaulted     -                  
Commercial     -     $ -     $ -  
Commercial Real Estate     1     $ 153,015     $ 153,015  
Commercial Real Estate Construction     -     $ -     $ -  
Consumer Real Estate-Prime     -     $ -     $ -  
Consumer Real Estate-Subprime     -     $ -     $ -  
Consumer Other     -     $ -     $ -  

 

Modification  
As of December 31, 2010  
    Number of
Contracts		     Pre-Modification
Outstanding
Recorded Investment		     Post-Modification
Outstanding
Recorded Investment		  
Troubled Debt Restructurings                  
Commercial     -       -       -  
Commercial Real Estate     1     $ 153,015     $ 153,015  
Commercial Real Estate Construction     -     $ -     $ -  
Consumer Real Estate-Prime     -     $ -     $ -  
Consumer Real Estate-Subprime     -     $ -     $ -  
Consumer Other     -     $ -     $ -  
                         
Troubled Debt Restructurings That Subsequently Defaulted                        
Commercial     -     $ -     $ -  
Commercial Real Estate     -     $ -     $ -  
Commercial Real Estate Construction     -     $ -     $ -  
Consumer Real Estate-Prime     -     $ -     $ -  
Consumer Real Estate-Subprime     -     $ -     $ -  
Consumer Other     -     $ -     $ -